Short-term performance is under pressure: in 2022, the company achieved revenue of US$1.12 billion, up 39.7% year on year; gross profit of US$174 million, up 45% year on year; net profit of US$84.31 million, up 69% year on year. We expect the company's FY2023 H1 revenue to be US$455 million (YoY +12.5%, HoH -36.0%) under the increase in iPhone 14 advanced specifications, but due to external factors such as increased R&D investment and exchange, net profit was US$32 million (YoY +2.6%, HoH -39.1%). Although the consumer electronics market is under pressure in the first half of 2023, we judge that the company's performance depends on the steady growth of customer A, and we are optimistic about the growth brought about by customer A's new product launch and market demand recovery in the second half of the year.
The tablet industry faced headwinds in the first half of the year, and the consumer electronics market will face recovery in the second half of the year. In terms of tablets, according to Canalys data, customer A's tablet sales in the first quarter fell 17% year over year. We estimate that the company's tablet pre-photography business may decline 13%-15% in the first half of the year. In terms of mobile phones, according to Canalys data, sales of iPhone phones fell 4.5% in the first half of the year. Customer A expects to release new mobile phones and tablets in the second half of the year. As a core supplier, the company's performance is expected to continue to improve. Furthermore, with the support of Lixun Group, the company is expected to increase its share of camera modules for major customers, and is optimistic about the company's chances of entering major customer mobile phone post-photography next year.
We are optimistic that the lidar and MR business will become the company's next growth curve. In terms of lidar, the company and Suteng Juchuang reached a joint venture to establish LiTeng to lay out lidar manufacturing. According to Sagiteng Juchuang's prospectus, the sales volume of lidar in 2020-2022 was 0.72/1.63/57,000 units, respectively. Cooperation between the two sides is expected to drive the company's lidar business for a long time.
For the next generation of terminal devices, customer A released the MR product “VisionPro” equipped with 12 cameras in June. Gaowei Electronics has been a supplier of major customers for a long time and is expected to participate in the share of new camera modules. Although the launch time and shipment volume of the “Vision Pro” are not yet clear, there is an opportunity to become a significant growth driver after the launch of the next generation product in 2025.
Investment advice: Since the company has the opportunity to enter the mobile phone post-camera project for major customers next year, the business may achieve rapid growth next year. We forecast that the company's revenue for 2023-2025 will be 1,247/20.24/2,659 million, respectively, and net profit of 0.88/1.48/192 million US dollars, corresponding to EPS of 0.11/0.18/0.23 US dollars. We are optimistic about the expansion of the company's optical business for major customers and the long-term opportunities for MR products. Based on the 2024 profit forecast, the PE valuation is 15 times. The target price is HK$20.76, corresponding to the FY 2023-2025 profit forecast of 25.3x/15.0x/11.6xPE, respectively, maintaining the “buy” rating.
Risk warning: 1) The recovery of the mobile phone and tablet market fell short of expectations; 2) competition in the lidar industry intensified; and 3) customer share expansion fell short of expectations.